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Apple's late co-founder, Steve Jobs, was a most quotable fellow, but some of his best stuff is not cited frequently enough. "I've never been able to figure out Wall Street," said Jobs in June of 2008, after
Apple's
aapl 1.7882625758116304%Apple Inc.U.S.: NasdaqUSD114.125
2.0051.7882625758116304%
/Date(1481308457445-0600)/
Volume (Delayed 15m)
:
19830533
P/E Ratio
13.813010882708586Market Cap
597858946891.729
Dividend Yield
1.9959101350215698% Rev. per Employee
1846780More quote details and news »aaplinYour ValueYour ChangeShort position
(ticker: AAPL) shares had gone on a wild 12-month ride, falling 40% from their all-time high at the time only to come roaring back 60%.

Jobs had just introduced Apple's second version of the iPhone, and there had been concerns leading up to the event that the new model would bring lower profit margins than the prior version. Jobs' answer to the hand-wringing was that if a company sticks to its knitting and makes great products, "Wall Street eventually comes out in the right place."

That's probably true in the post-Jobs era, too.

My colleague Jack Hough notes that CNBC's Jim Cramer said earlier this month that the vast majority of the sellers of the stock were investors with big capital gains, looking to avoid higher tax rates next year—a "reverse January Effect," as it were (see "The Reverse January Effect."). Whether that's true or not -- and Jack notes that there's no clear evidence that it is -- Apple's shares look attractive, he writes, at $509.59, down 30% from their all-time high.

To that I'll add that the company's shares will eventually rebound as it refocuses on what it does best, making great products that generate huge amounts of money.

SOME OF THE FAST MONEY might have been chased away amid that decline. "I've got to scroll down now several pages to get past all the new money that took large positions in the stock this year," says David Rolfe of Wedgewood Partners, whose firm has more than 9% of its total assets under management in Apple. He was referring to the list of holders, sorted by reported portfolio weightings, in Edgar, the Securities and Exchange Commission's electronic database of filings.

It used to be that he would see his firm near the top each quarter. Not so now, as money managers piled into the stock this year. Indeed, in the September quarter, Wedgewood ranked merely 67th in percentage of fund holdings invested in Apple.

Chicago-based Gladius Capital Management topped Edgar's list, with 94% of its portfolio in Apple in September, after having purchased the entire reported holding, 17,416 shares, in the quarter. Gladius did not return a call for comment.

It's not just small, obscure shops: Susquehanna International Group increased its holdings by half in the quarter, to 21.4% of the firm's assets.

Such large new purchases, or doubling or tripling of prior positions, were propelled not only by strong earnings reports at the start of this year, but by the frenzied enthusiasm they produced in some Apple bulls.

Hedge-fund star David Einhorn was heard to mutter on CNBC's Squawk Box in mid-July "I would expect" when asked if Apple could become the first trillion-dollar company. "It's the best big growth company that we have...and it trades below the multiple of the S&P 500...I think that's extraordinary," he said. Einhorn declined to talk with Barron's.

Rolfe thinks that many funds overweight Apple–and in particular hedge funds, which have fewer restrictions on how large a weighting they can take–gorged themselves so greatly that they were dashing for the exits at the least hint of trouble.

APPLE HANDED THE MARKET JUST such a hint when it said in October that gross profit margin may decline this quarter, which analysts attributed to higher costs to ramp up the iPhone 5, and lower margins for the newly introduced iPad mini. "It was the perfect storm of overweighting," Rolfe says.

If Einhorn was the face on the stock's summer of love, the shares got the cold shoulder in early November from bond king Jeff Gundlach, who said he was shorting the shares down to $425, and basically equated Apple bulls with the sycophants of a cult.

"It's one of these things where everywhere you go there's an obsession with it," Gundlach told CNBC. "And it seems like every meeting I have, everybody owns it."

We will likely see a "very different picture" of holdings when funds report their December-quarter changes come mid-February, says Rolfe. He expects many to have trimmed their outsize investments in the shares.

Whether they're selling for tax reasons or not is immaterial. Some selling has likely cleared fickle money from the stock. That may shift the focus back to basics.

The stock valuation is undemanding, with Apple trading at just seven and a half times projected earnings of $49 a share in the fiscal year ending in September, after backing out $128 per share in cash and investments.

Estimates seem undemanding, too, with the average analyst prediction for the current quarter's revenue, $54.7 billion, not far from the $52 billion Apple projected on Oct. 25. That figure has dropped slightly from $55 billion projected before Apple reported. But it's still a lot more than the $44 billion estimate analysts had a year ago at this time.

To Wedgewood's Rolfe, the stock is trading as if it may increase revenue only 3% or 4% per year in perpetuity, rather than the 22% modeled for this year. Moreover, the estimate above is as close to Apple's guidance as Street estimates have ever been, Rolfe says, at least in the seven years his firm has owned the shares. That suggests to him there is little chance Apple will to disappoint when it reports next month.

The numbers so far are stellar. Apple sold five million iPhone 5s in the first weekend the device went on sale, beating previous iPhone records. And it sold two million of the things in China the first weekend they arrived there, again beating records. That is without even having a deal with the largest carrier in the world,
China Mobilechl -0.5513692335967653%China Mobile Ltd. ADRU.S.: NYSEUSD54.11
-0.3-0.5513692335967653%
/Date(1481308434804-0600)/
Volume (Delayed 15m)
:
290904
P/E Ratio
13.00587074731726Market Cap
223086166347.773
Dividend Yield
3.5513458514475995% Rev. per Employee
243572More quote details and news »chlinYour ValueYour ChangeShort position
(CHL).

What the market eventually seems to figure out, to Jobs' point, is that Apple ends up making money despite incredible competition. It is not the world's biggest seller of mobile phones; that honor belongs to Samsung Electronics (005930.Korea), and its tablet market share is already being eroded by cheaper alternatives. But as long as Apple sells tens of millions of both at prices that remain rational, it can continue growing revenue and profit at a rate that is not reflected in its share price.